From the Desk of Louis Sykes

As a teenager, I was deep into science.

It wasn't until the last year of high school that I made the last-minute decision to study finance at university. For the longest time, I was preparing to study mathematics, astronomy, and physics.

The universal disciplines of science I learned in this period will always stick with me as an aspiring trader.

One discipline is the Feynman Technique, a foundational mental model you can use to unlock growth in your career, startup, business, writing, and life.

The largest insider transaction on today's Hot List is a Form 4 filing by Ernest Garcia II, CEO and co-founder of Carvana $CVNA.

CVNA just raised an additional $1 billion via a private offering of perpetual preferred stock, and Garcia has taken a large allocation.

He remains CVNA’s largest shareholder by a wide margin.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

Earlier in the month, we pointed out breadth deterioration in the US dollar.

While the dollar pressed to new highs against the yen, the pound, and the euro, it struggled to gain ground against commodity-centric and emerging market currencies.

The lack of broad strength had us questioning the validity of the recent rally in the US Dollar Index $DXY. 

That’s changed recently.

Today, the dollar index is catching to new highs against a backdrop of broadening strength, not weakness. Now that we’re seeing dollar internals flip and start to confirm these new highs from the index, this is not a trend we want to fight.

And, to be clear, we haven’t been. 

While we’ve been skeptical of the rally in the DXY, we’ve expressed a bullish view on the dollar via the major crosses. They’ve been the weakest links and main drivers of DXY strength.

...

It’s been just over three weeks since Elon Musk filed his original 13G and revealed an investment in Twitter $TWTR.

Now, it looks like he’s about to take control of the entire company.

Yesterday, it was announced that Twitter has accepted his $44 billion offer to take over the company and go private.

Here’s what else is happening in the world of insider activity…

As has been the theme for some time, there's been little in the way of actionable trade ideas.

Last week, we had the following message:

As we’ve said before, one of the big characteristics that often differentiates good traders from mediocre ones is the ability to sit out when necessary.

Correlations to weak equities remain highly elevated. We’d like for those to dislocate before getting overly optimistic in the near term.

When it comes time to put money back on the table again, it’ll be obvious. Otherwise, we’ll continue being patient.

Nothing has changed.

 

 

The market is messy and continues to remain so. There are only a select few names that are displaying the strength with consistency. In a messy market, that's the best area to focus on.

Read on to know more.

We retired our "Five Bull Market Barometers" in 2020 to make room for a new weekly post that's focused on the three most important charts for the week ahead.

This is that post, so let's jump into this week's edition.

With the S&P500, Dow Jones Industrial Average, Nasdaq 100 and Global 100 Indexes down in recent weeks, the Dow Jones Transportation Average has been up each of the past 2 weeks.

And Transports started out this week positive once again:

From the desk of Steve Strazza @sstrazza

This is one of our favorite bottom-up scans: Follow the Flow. In this note, we simply create a universe of stocks that experienced the most unusual options activity — either bullish or bearish… but NOT both.

We utilize options experts, both internally and through our partnership with The TradeXchange. Then, we dig through the level 2 details and do all the work upfront for our clients.

Our goal is to isolate only those options market splashes that represent levered and high-conviction, directional bets.

We also weed out hedging activity and ensure there are no offsetting trades that either neutralize or cap the risk on these unusual options trades.

What remains is a list of stocks that large financial institutions are putting big money behind… and they’re doing so for one reason only: because they think the stock is about to move in their direction and make them a pretty penny.

Then we flip through our list of stocks flashing...

From the desk of Steve Strazza @Sstrazza

Our Top 10 Charts Report was just published.

In this weekly note, we highlight 10 of the most important charts or themes we're currently seeing in asset classes around the world.

Selling Spreads

Speaking of leaders, even the strongest stocks have come under pressure in recent sessions. There was no good place to hide toward the end of last week as stocks were being sold indiscriminately. We saw the start of this on Thursday as the market leaders came under serious pressure. Friday, that volatility accelerated as investors shrugged off record earnings numbers and took profits across the board.

Over the past few months, we’ve seen money rotate into defensive groups or growth stocks in sessions where cyclical stocks have sold off. That wasn’t the case last week as the market was a sea of red.

The below chart shows one of the strongest industry groups - Agribusiness, as well as one of the weakest - Biotech. One in a strong uptrend and the other in an ugly downtrend. But, last week it made no difference as sellers were in control of both the leaders and the laggards. This is...

From the desk of Willie Delwiche.

Key Takeaway:

• Downside volume surge shows selling accelerating.
• Risk backdrop argues for caution.
• A new environment requires an adaptive playbook.

Our risk indicators continue to make the case that this is a risk-off environment. 14 of the 20 asset pairs we look at in our Risk Off vs Risk On indicator have the risk-off component within 10% of new highs. The tilt toward risk off leadership is intensifying. This is echoed in our relative strength rankings, which show Energy slipping and Utilities and Consumer Staples (defensive sectors) taking over the top two spots. Four times as many NASDAQ stocks have been cut in half as have rallied 50% from their 52-week lows. The improvement seen here during the rally off of the March lows has been all but undone. We have continued to see more stocks making new...

It's been a week since our last crypto market report.

Since then, there's been nothing in the way of actionable developments.

This note will act as a short interim update.